Sale of FENI Combine

The French firm SCMM bought "Feni" Nickel Combine, the largest Macedonian misinvestment worth DM 1 billion which was sold for DM 5 million. According to analysts, this was a brilliant move on the part of the Government because thereby it managed to get rid of the greatest loss-making enterprise (which is confirmed by its sale for a pittance) and, at the same time, to fulfil the last condition for getting USD 86 million from the International Monetary Fund and the World Bank. In addition, directly or indirectly, it secured jobs for 2,000 workers and thus improved its own rating.

AIM Skopje, November 10, 2000

The Macedonian Government managed to sell the nickel producing Combine "FENI" from Kavadarci, the largest Macedonian loss-making company thus fulfilling the last precondition for the approval of USD 86 million worth credit by the International Monetary Fund and the World Bank.

Its new owner is the French company "Societe Comercial de Metals at Minerals" (SCMM) which has been cooperating for some time with the German concern "Thyssen-Krupp", the leading world nickel producer. "Feni" was sold through the mediation of the Dutch consulting firm "Arthur Andersen", among the three best firms of this kind in the world, whose services were paid by the Dutch Government, as a grant to Macedonia. "Feni" was sold for USD 2,25 million and the French have undertaken to invest another USD 36 million over the next five years in capital inflow, modernisation and expansion of production of the Combine which is a unique nickel producer in the Balkans. The French have also taken upon themselves to keep all 880 employees and to pay the electricity bill at the rate of USD 22 per megawatt on which they signed a three-year contract with the Macedonian Power Generating and Distributing Company worth USD 25 million.

SCMM was one of the three firms which submitted their offers for the purchase of "Feni" (also interested were the British "Imperial Metal" and Swiss "Glenkor"), but the French won and got the Combine since they have business links with "Thyssen-Krupp", which represented an additional guarantee, and because they offered the highest electricity price of 22 dollars per megawatt hour. The Government sold "Feni" free of all debts by transferring the DM 100 million worth of losses to "Fenimak" Consortium, which was running "Feni" from 1990 to 1998.

"Feni" was written of last March when it stopped working although the price of nickel at world markets offered good chances of profit. Nevertheless, the Government's decision to suspend its operation was imposed by political pressures of the International Monetary Fund and the World Bank which insisted that the Combine couldn't be financed from the state budget. At that time no state official dared promise the sale of "Feni" or that he could find a solution for this Combine which is of strategic importance for the Macedonian economy.

At one time, when the price of nickel at world commodity exchange was favourable, the Combine made foreign exchange inflow of over USD 50 million per year, which was of enormous importance for the Macedonian economy. In addition, the World Bank and IMF demanded of the Macedonian Government to find a solution for "Feni", i.e. to find a private company which would buy it and assume the risk under conditions of a low world price of nickel. The world bankers have explicitly made it clear that the state couldn't be the owner of a combine which can make great profits or huge losses.

Two years ago, when the nickel price was something over USD 4,000 per tonne, "Feni" lost USD 10 million in just one year. At that time a decision was brought to suspend its operation and to keep the plant running until the buyer is found or, the Combine closed down. However, luckily for "Feni" last May "Thyssen-Thyssen" of Australia, one of the biggest, best and most modern world nickel producing facilities, suffered a major damage. The damage occurred due to technical negligence in the production technology. "Thyssen-Thyssen" stopped working immediately after it came into operation.

The largest investor in "Thyssen-Thyssen" was the German "Krupp", the present indirect boss of "Feni". According to estimates, it was planned for the Australian Combine to be the greatest producing nickel giant than any other facility in the world, while the new technology applied there, was supposed to lower the price of nickel so as to secure "Krupp" and its companies and daughter-firms a monopoly over the world nickel production. After the damage, the price of nickel at world commodity exchange started to grow so that last June it reached USD 6,100 per tonne, which is the price of production in "Feni". Now this metal sells at USD 9,000 per tonne.

The price rise on the commodity exchange made "Feni" attractive for foreign companies which started showing interest in buying it. This June the Government reached an agreement with "Glenkor" on the sale of "Feni". Then, the World Bank asked for the revision of contract considering it to be harmful and unfavourable for Macedonia.

Representatives of the World Bank instructed the Government to find a foreign independent established consulting firm which would find a buyer by November and, if not, close down the Combine. The International Monetary Fund and the World Bank did not allow the state to be Feni's owner, because Macedonia is a small state and has no potentials for covering the losses when the price at world markets goes down. Then the Government hired "Arthur Andersen" which succeeded in finding the buyer for "Feni" and selling it cheap. However, it also found a company which will assume a great risk of "Feni", which was known for 20 years as the largest Macedonian misinvestment DM 1 billion worth, and sold it for DM five million.

"Feni" was built in 1978 and cost USD 600 million. In these 22 years, the Combine worked with interruptions. Its operation was stopped for the first time in 1980 because of the low world price of nickel. In 1990 the Combine was taken over by the Consortium "Fenimak" composed of strong domestic firms. It worked until 1998 when it suffered some DM 100 million worth losses. Since 1998 till last March the Combine was financed by the state, and its workers were the only ones of all Macedonian firms to receive their wages from the budget. Then, at the insistence of the International Monetary Fund, the Government had to stop its financing of "Feni".

Its capacity is the production of 11,000 tonnes of nickel per 12 months. At the present world market price that would mean a profit of DM 20 million per annum. At this moment one of two existing electrical furnaces in "Feni" is working, producing 5,000 tons of nickel annually. In the last 12 months it was shut down because of the prohibition of the international Monetary Fund when "Feni" lost DM 10 million.

According to the opinion of economic experts, the sale of "Feni" to "Thyssen-Krupp" was full hit since the risk for its operation will be assumed by a foreign company. If it operates well, it will provide work for several firms in Kavadarci. Besides, this is a major political point for the Government because, at one stroke, it managed to both sell the greatest loss-maker which was a sore spot of the Macedonian economy for the last 20 years, and by this sale to fulfil the condition of the World Bank and IMF and get a USD 86 million worth credit for the reform of the public administration sector and privatisation of firms. In addition, the Government has managed to improve its rating by keeping jobs of 880 workers, while the work of "Feni" will secure wages for additional 1,000 people in other firms which indirectly depend on the Combine.

AIM Skopje

NIKOLA STOJANOV